South Korea advances tokenized securities rules ahead of 2027 rollout
South Korea's Financial Services Commission has introduced detailed proposals for regulating the issuance and trading of tokenized securities, with a regulatory framework set to take effect in February 2027. The new rules will enable companies to issue stocks, bonds, funds, and fractional investment securities in tokenized form while complying with new capital and operational requirements.
Key Provisions of the Proposed Rules
The proposed regulations will allow companies to issue and circulate stocks, bonds, funds, and certain fractional investment securities in tokenized form. Entities that issue tokenized securities while directly managing customer accounts will be required to hold at least 4 billion Korean won (approximately $2.8 million) in equity capital and maintain dedicated compliance and technology teams.
Revisions to OTC Trading Regulations
The proposal introduces an additional over-the-counter (OTC) exchange license specifically for debt securities. It also caps retail investors’ annual net purchases at 100 million won (about $70,000) per OTC platform. These measures build upon a three-phase roadmap announced on September 4 to transition securities issuance and trading onto distributed-ledger infrastructure. The proposed rules are open for public consultation until November 11, followed by an approval process. They are scheduled to take effect on February 4, 2027, simultaneously with legal amendments recognizing distributed ledgers as official infrastructure for issuing and circulating securities.
Why it matters
The proposed regulations mark a significant step in the development of South Korea’s tokenized securities market. By establishing clear standards for issuance and circulation of security tokens, including capital and organizational requirements for issuers, the framework aims to enhance investor confidence and safeguard transactions. The OTC trading rules introduce controls to mitigate risks and prevent abuses by retail investors. Overall, these measures lay the groundwork for integrating distributed ledger technology into the securities sector, fostering innovation and market transparency while aligning with global trends in financial digitization.
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